27. According to developed countries, the purchase of cheaper foreign goods by domestic consumers leads to: a. expansion of the import competing sector. b. expansion of the exporting sector. c. downsizing of domestic import competing firms. d. imposition of trade barriers by the domestic firms. e. increase in the financial account deficits. 28. Consider a Forex market where dollars are traded for pounds. Suppose the U.S. interest rate rises, leading to an increase in the demand for dollars. This will cause the demand curve of pounds to the supply curve of pounds to , leading to a(n) in Es/f. a. shift rightward; shift leftward, increase b. shift leftward; shift rightward; fall c. shift rightward; remain unchanged; increase d. remain unchanged; shift leftward, increase e. shift leftward; remain unchanged; fall 29. Suppose the equilibrium value of Es/e is 1.27. Ceteris paribus, a reduction in the U.S. interest rate will lead to which of the following? a. It will cause investments in dollar-denominated assets to appear more attractive. b. It will shift the U.S. rate of return curve to shift to the right. c. It will shift the European rate of return curve upward. d. The investors will revise their expectations regarding the future exchange rate. e. The new equilibrium exchange rate will be higher than 1.27. 30. The rate of return on any domestic investment: a. is the interest rate on that investment. b. is measured by the rate of inflation. c. depends on the exchange rate. d. is independent of the risk of the investment. e. depends on the liquidity of the asset. 31. The problem of trade deficits run by a net debtor country is more worrisome: a. the smaller the net debtor position. b. the smaller the net debt (rather than equity) position. c. the larger the CA deficit. d. if falling net debt correlates with falling investment. e. if the interest rate on external debt is stable (fixed)